Pending Legislation Will Impact Owners

by TimeSharing Today

Several new bills introduced in Florida and Hawaii may have far-reaching consequences for timeshare owners if similar laws are adopted by other states. Florida and Hawaii have many timeshare resorts and are usually at the forefront of timeshare legislation frequently emulated in other states. The Florida bill has been adopted, while the Hawaii bills have vocal opposition.

The Florida law is designed to curb resale scams by "resale service providers" through requiring certain enumerated disclosures, prohibiting specified activities, and requiring a contract containing language notifying the owner of his or her rights, including the right to cancel. One of the Hawaii proposals would require owners of Hawaiian timeshares to utilize a licensed real estate broker when renting out their weeks. The other proposal would require owners' mailing addresses to be made available to other owners for certain purposes.

Resale Scams

The proposed Florida legislation was announced with great fanfare by the Florida Attorney General late last year but was, at that time, opposed by licensed real estate brokers who felt that they were sufficiently regulated through the state agency that issues real estate brokerage licenses. A statement issued by the Licensed Timeshare Resale Brokers Association stated:

Placing new laws and regulations upon licensed brokers, who are already governed by their state real estate commissions, places an undue amount of new regulations and paperwork on the very companies that are working hard and honestly in the resale community.

However, revisions made since the introduction of the bill would exempt licensed resale brokers who do not charge fees for advertising.

Also, as originally written, the bill would have effectively caused TimeSharing Today to discontinue classified ads for Florida timeshares. Revisions to the original proposal would now exempt TimeSharing Today's classified advertising because individual ads cost much less than the $75 threshold in the proposed statute.

The proposed legislation includes the following restrictions and requirement for a timeshare resale advertiser:

• May not misrepresent to an owner that a potential buyer exists.
• May not mislead a customer as to the success rate of the advertiser's sales.
• May not provide brokerage or direct sale services.
• Must honor a cancellation request made within 7 days following a signed agreement.
• Must provide a full refund by a timeshare owner within 20 days of a valid cancellation request.
• Must not collect any payment or engage in any resale advertising activities until the timeshare owner delivers a signed written agreement for the services.
• Must also provide a full disclosure statement printed in bold type, with no smaller than a 12-point font, and printed immediately preceding the space provided for the timeshare owner's signature.
• Must provide an advertising agreement in writing.

A company which doesn't follow these provisions has committed a violation of the Unfair and Deceptive Trade Practices Act with a penalty up to $15,000 per violation.

Transient Tax

Hawaii imposes a transient accommodations tax of 9.25% on rentals of less then six months. Since a great number of timeshare owners rent their weeks themselves, legislators believe that many owners of these rented timeshare units are not in compliance with payment of the transient accommodations tax. The bill would require owners to utilize the services of a licensed real estate broker, who would then collect the tax when collecting rent on behalf of the owners. Owners who do not comply within seven days after notice from the department of taxation are subject to a fine up to $1,000 per day for each day of noncompliance.

Owners who oppose the bill see it as "a money grab" by realtors and a big loss of revenue because of the need to pay a broker to rent the unit instead of arranging the rental on their own.

However, brokers and legislators say the state is losing millions because owners aren't collecting and paying the transient accommodation tax.

Owners List

In a recent case (Worldmark, The Club v. Robin Miller), the California Supreme Court found that the California statute, which requires that owners' addresses be provided, also means that the email addresses should be given to the owner. The developer had argued that the statute did not require it to provide email addresses, but permitted them to provide only street addresses. However, the Court found that the $280,000 cost for the mailing would have been prohibitive for an individual. In ordering the developer to provide email addresses to the requesting owner, the court noted that "denial of the right to contact other members by email effectively denies a member the right to contact other members for a proper purpose."

The California Supreme Court is widely respected by courts in other jurisdictions; it would not be surprising if other state courts confronted with this issue will rely on the California case as precedent.

On March 12, 2012, several groups testified before the House Committee on Tourism or filed statements to express views on the proposed legislation.

Two representatives from the Hawaii Department of Commerce and Consumer Affairs testified in favor of the bill, one stating that "access to owner information is important so that owners can meaningfully participate in decisions that affect their ownership rights." Another representative from a different division pointed out that the bill would give timeshare owners the same rights to obtain an owners list as condominium owners now have in Hawaii.

Statements in opposition to the bill were made on behalf of Wyndham Vacation Ownership, Consolidated Resorts Management, ARDA and RCI. ARDAROC did not take a position before the committee.

The main points of those in opposition were that owners have an expectation that personal data will remain confidential when timeshares are purchased, that the list could be leaked and used for junk mail, and that the legislation is unnecessary because under existing Hawaii law, an association must develop a reasonable procedure by which owners can solicit proxies or votes or provide information to other owners with respect to association matters.

A number of those in opposition stated that they were unaware of any laws in other states that required the release of the owners list. Several indicated a willingness to work with the legislature to come up with a reasonable solution "that protects the integrity of the owners' list while still providing owners with an opportunity to communicate on legitimate association business such as proxy matters."